Third-party logistics (3PL) is the outsourcing of some or all aspects of a company’s fulfillment process to a provider specializing in fulfillment logistics. 3PLs integrate warehousing and transportation logistics into one service, freeing up customers to focus on core aspects of their businesses.
Examples of companies that provide 3PL services include household names like FedEx and UPS as well as ShipBob, Red Stag Fulfillment, and Shopify Fulfillment Network.
Syntelic’s software products, which cover Route Planning, Load Planning, and Transportation Analytics, help streamline 3PL distribution. Just as 3PLs optimize fulfillment logistics for their customers, Syntelic partners with 3PLs to optimize their distribution services.
What Is a 3PL Company?
A 3PL company handles the fulfillment process for its clients, who are often e-commerce retailers seeking to better serve their customers and optimize their logistics operations. As logistics companies, 3PL providers are better positioned than most retailers to streamline the fulfillment process because they have logistics-specific industry experience, infrastructure, and personnel.
Services provided by 3PLs typically include:
- Receiving finished products and/or raw materials
- Warehousing of goods, maintaining proper storage conditions
- Inventory management
- Receiving customer orders from various retail channels
- Fulfillment—including picking, packing, and shipping products and handling returns
Why Are Third-Party Logistics Helpful?
Third-party logistics companies help their customers focus on core business activities like improving existing products or creating new ones. Below are three ways that 3PLs achieve this.
- Logistics expertise: 3PLs specialize in logistics; most retailers do not. 3PLs leverage their industry expertise to optimize each client’s fulfillment process. Because they handle shipping for multiple client companies, they can often negotiate low shipping rates and provide discounts on packaging materials.
- Logistics infrastructure: If a retailer wants to handle fulfillment in-house, they’ll need their own warehouses, warehouse management system, and trucking, and they’ll have to develop any required systems on their own. A 3PL already has logistics systems and infrastructure in place.
- Logistics personnel: If a retailer wants to handle fulfillment in-house, they’ll also need personnel to oversee and run their warehouse operations. In addition, they’ll need to ensure compliance with any regulatory requirements related to warehousing and shipping. A 3PL already has the right personnel in place and knows how to meet regulatory compliance guidelines.
3PL Fulfillment Process
The 3PL fulfillment process works for both business-to-business (B2B) and direct-to-customer (DTC) fulfillment.
B2B scenarios include:
- Shipping wholesale orders to business customers
- Shipping products to retail chains for resale
- Drop-shipping products ordered through a retailer’s online store to a store for store pick-up
In DTC fulfillment, a 3PL logistics provider handles the whole process of picking, packing, and shipping products to consumers as orders come in.
Freight Shipping
If a customer needs to move goods in bulk, most 3PLs offer full truckload (FTL) and less-than-truckload (LTL) freight shipping. This may be through the 3PL’s own trucks or, more often, through a trucking company contracted by the 3PL.
Customers can take advantage of these services for their B2B shipping needs or to move goods between 3PL warehouses. (Most 3PLs maintain multiple warehouse locations so they can offer their customers faster shipping.)
Inventory Management
Inventory management is a vital part of 3PL service. After a 3PL receives products on behalf of a client company, it then appropriately stores the products until they’re picked to fill customer orders. Goods with very particular storage requirements include items that need cold storage, hazardous materials, extra-heavy or bulky products, and high-value products.
Most 3PLs use a warehouse management system (WMS) to manage client inventory. A WMS is a software that tracks goods all the way from when they enter a warehouse until they leave. A WMS allows a 3PL to help clients ensure they have inventory on hand to meet consumer demand, especially during seasonal peaks in sales.
Reverse Logistics
Reverse logistics, or returns, are a fact of life in the retail world. Handling returns is yet another way in which 3PLs streamline the fulfillment process for their clients.
Syntelic Software for 3PL Distribution Efforts
As logistics experts, 3PL providers look for every available opportunity to streamline their operations and improve the service they offer their customers. Whether a 3PL has its own fleet of trucks or has a contract with an outside trucking company, it can benefit from using Syntelic software to optimize the crucial distribution aspect of its business.
Syntelic’s web-based, customized software solutions cover Route Planning, Load Planning, and Transportation Analytics.
Let’s take a look at how each of these offerings can benefit a 3PL provider.
Transportation Analytics
Syntelic’s Transportation Analytics software integrates with third-party on-board driving data collection systems. The data that are imported into the software at regular intervals (e.g., every half hour) give 3PLs detailed insight into their distribution operations.
Summary data may show that all drivers are on time; the details may show that some drivers are consistently late and others are consistently early—so the numbers average out to on-time in the summary report.
Syntelic’s Transportation Analytics software enables 3PLs to drill deep into collected data, isolate performance outliers, and find ways to improve:
- A driver has a planned route that should enable on-time deliveries, but they’re often late. Analytics show they’re deviating from the planned route.
- Some drivers arrive on time at their first stop but then run late. Analytics show they’re taking longer than the allotted time to unload.
- A driver is on time, but analytics show they’re consistently speeding and slamming on the brakes—an accident waiting to happen.
Many 3PLs use transportation analytics that give them five or six summary reports that can’t be altered without days of work and/or additional costs. Syntelic’s Transportation Analytics software can generate ad hoc reports to show 3PLs whatever data they need to see.
The CEO at one Syntelic client company likes to play a little game with his analytics guy. He’ll say, “I bet you can’t tell me …” and then rattle off an obscure stat. The analytics guy jumps on the Syntelic Transportation Analytics platform and comes back with the requested info nearly every time.
Route Planning Software
Syntelic’s Route Planning software offers 3PLs flexible routing and scheduling for all kinds of deliveries: outbound deliveries with multiple stops, backhauls, drop-n-picks, and more. The Route Planning module integrates with the Transportation Analytics module to estimate delivery and drive times and drive distances.
The Dispatch Planning extension manages driver resources for local routes, overnight runs, and multi-day teams. And it automatically tracks Department of Transportation hours-of-service constraints to ensure regulatory compliance.
Load Planning Software
3PLs know load planning can be tricky. Costs add up when trucks go out over weight or when the day’s last order is loaded by the door, blocking other orders from being unloaded.
In the logistics industry, the ability to optimize the performance of repetitive tasks and avoid mistakes can mean the difference between increased profits and falling behind the competition.
Syntelic’s Load Planning software streamlines workflow at the loading dock by providing load diagrams that work—every time. The load planning module juggles all kinds of constraints to optimize each load, managing:
- Truck-related constraints: Various compartments, side doors, etc.
- Product-related constraints: Products that shouldn’t be mixed, customers whose orders can’t be mixed, frozen and refrigerated storage requirements, and more
- Sequencing constraints: Sequence of stops, customer unloading requirements, and warehouse workflow
- Load balancing: In addition to making sure that loads aren’t overweight, Syntelic’s load diagrams also ensure that weight is distributed properly over drive, tractor, and trailer axles.
Finding the Right 3PL Company
If you’re looking to outsource your fulfillment operations to a 3PL company, there are a few things to consider.
First, make sure any 3PLs you’re looking at work within your industry. The largest 3PLs work across multiple verticals, but many smaller 3PLs specialize in specific industry niches.
Second, find out where a 3PL’s warehouses are located. Do its warehouse locations line up with where your customers are located so you can offer your customers one- or two-day shipping?
Third, take a look at the breadth of a 3PL’s fulfillment services and ensure they meet your needs. Do they offer low shipping rates? Do they customize packaging? Can they handle returns for you as well as outbound shipping?
3PL Warehouses
3PL companies are sometimes referred to as 3PL warehouses. All the basic services involved in 3PL management are implied in the term 3PL warehouse. This includes receiving and storing products, inventory management, and order fulfillment (picking, packing, shipping, and handling returns).
3PL FAQ
Read on for answers to a few common questions about 3PLs.
What’s the Difference between 3PL and 4PL?
We’ve already discussed 3PL services in detail. But what’s 4PL?
4PL covers everything that 3PL covers but goes even further. 4PL companies oversee the entire supply chain, from manufacturing all the way to shipping to consumers, utilizing their expertise to optimize client operations.
The biggest difference between 3PL and 4PL is that 4PLs don’t typically operate their own warehouses and shipping networks; instead, they usually work with multiple 3PLs for their warehousing and trucking needs.
The advantage of a 4PL is that even more of the supply chain is outsourced and off a client company’s plate. The downside is that the 4PL company is a middleman between the client and the 3PL, which sometimes leads to delays in resolving service issues.
How Does a 3PL Provider Help Trucking Companies?
3PL providers and trucking companies are natural business partners.
There are many niche 3PL providers that work within a certain industry. They have their own warehouses—usually in multiple locations—and WMS software. But they often don’t maintain their own fleet of trucks. Trucking companies can partner with 3PLs to meet their distribution needs.
How Is a 3PL Different than a Private Warehouse?
Some companies—usually large firms—maintain their own warehouses and fulfill their own orders. Companies with private warehouses are actually utilizing first-party logistics, not third-party. 3PLs don’t handle their own fulfillment process; they take on the fulfillment process for multiple client companies.
Contact Syntelic for Assistance Wwith Third-Party Logistics
Any 3PL provider can benefit from Syntelic’s Route Planning, Load Planning, and Transportation Analytics software.
When you partner with Syntelic to optimize your outbound distribution operations, we don’t merely provide generic solutions; we work with you to customize the implementation of each software module to your specific needs. In addition, we provide initial software training for your personnel and ongoing, on-demand support.
Contact Syntelic today to discuss your outbound logistics needs and learn more about how Syntelic can benefit your 3PL operation.